Posted on 05/02/2005 7:35:40 PM PDT by weegee
During the past three decades, Clear Channel Communications of San Antonio has amassed a mammoth media empire, but now it's breaking up into three separate billboard, entertainment and radio companies.
The restructuring — announced unexpectedly as Clear Channel released its quarterly earnings — came as the company's profits fell 59 percent during its first quarter, primarily from sagging radio advertising revenues and a downturn in its live entertainment business.
“(The restructuring) will provide a springboard for meaningful growth and enhanced value in each of our businesses,'' Clear Channel CEO Mark Mays said during a conference call with analysts.
After the restructuring, Clear Channel will own 90 percent of Clear Channel Outdoor, a new public company based here with about $2.5 billion in revenue for 2004.
Clear Channel Communications will also keep its headquarters here along with its domestic radio stations, international broadcast investments and TV stations. All of its nearly 1,000 local employees with outdoor and radio will remain in San Antonio.
Mark Mays and his brother, Randall Mays, will serve as chief executive and chief financial officer of the two companies, respectively. The companies will also share the same board of directors.
In addition, Clear Channel will also spin off 100 percent of Clear Channel Entertainment into a publicly traded company, which will be based in Houston. Brian Becker, its CEO, has resigned and Randall Mays will serve as acting CEO until a replacement is named.
Clear Channel's restructuring comes on the heels of major changes in its radio and concert businesses. During the past few years, Clear Channel has suffered from declining radio revenues as competition heats up from alternative music distribution methods such as satellite radio and portable music players. On top of that, a sluggish advertising market has hit the entire radio industry hard.
Clear Channel is involved in many different industries, and restructuring into three separate companies will benefit investors and provide the companies with more opportunities for growth, said Lee Westerfield, an analyst with Harris Nesbitt Gerard in New York.
“It's a great benefit to all involved and a bold move,'' he said.
Since founding Clear Channel in 1972, Lowry Mays — Mark and Randall's dad, who is now the company's chairman — has built Clear Channel Communications into the nation's largest radio company with more than 1,200 stations. Lowry stepped down as CEO last year following a stroke.
Under his leadership in the early 1990s, the company went on a buying spree, adding outdoor and entertainment industries to create a huge media company with $9.4 billion in 2004 revenue.
Yet with the growth has come increasing scrutiny from regulators as the Justice Department has launched two investigations into allegations of monopolistic practices in one of Clear Channel's radio markets and also in its live concert business.
Consumers have also blasted the company for creating homogenized radio playlists and limiting which artists get airplay.
Clear Channel's critics viewed the news of the company splitting up with skepticism. Clear Channel's restructuring means its market domination and anti-competitive business practices didn't work, said Michael Bracy, founder of the Future of Music Coalition. And, he said, the radio and entertainment businesses still have problems that antitrust regulators need to examine.
“Clear Channel is like an onion — there are multiple layers of concern about what has happened to the music industry and the role Clear Channel played in it,'' he said.
As profits decline, Clear Channel's stock has dropped nearly 30 percent from a year ago. The market did not applaud Clear Channel's moves Friday. Instead, Clear Channel's stock closed down 6 centsÖ to $31.94Ö on the New York Stock Exchange.
During the first quarter, Clear Channel's net income dropped 59 percent to $47.9 millionÖ or 9 centsÖ per share on revenues of $1.9 billion, a decrease of 4 percent from the same period a year ago.
Radio broadcasting revenue dropped 7 percent Öprimarily because of less commercial minutes under the company's new “less is more'' initiative to reduce advertising clutter on the air. Clear Channel's live entertainment business dropped 17 percentÖ and outdoor advertising rose 11 percent.
Clear Channel plans to complete its realignment by the end of the year, Mays said, and it will later announce details about how its $7.5 billion in debt and assets will be divided up among the companies.
As a result of the restructuring, shareholders will receive a special dividend of $3 per share and a 50 percent increase in its annual dividend, which will be boosted to 75 cents per share.
After the announcement, Standard & Poor's dropped its outlook on Clear Channel's debt from stable to negative because of concerns about how the restructuring would affect earnings. It's also concerned that the “less is more” advertising initiative is not resulting in increased profits.
Moody's Investors Service warned it may cut Clear Channel's debt rating to junk status because of its restructuring plans. Moody's currently gives the company its lowest investment-grade rating.
During the conference call with analysts, Mays acknowledged that the less is more initiative needs time and that second-quarter radio advertising revenues are down 4.3 percent. But he said the company sees improvement going forward.
“It's a slow process,'' he said.
Rock and Roll PING (although this is not strictly a rock and roll article).
So, are they becoming blurry channel now?
Two words: Air America
Now Clear Channel Radio won't have a financial stake in the artists who are touring.
Perhaps some bands will lift their bans on playing midsize venues owned or operated by CC.
I think more menacing is Viacom when you consider that they own Infinity Broadcasting (the number 2 player) AND MTV as well as CBS, et al.
I'm no fan of Clear Channel by the way. There is no dedication to conservativism. That myth came up because of the millions they paid Rush Limbaugh for syndication.
Just as Fox is not conservative simply because of the existence of "Fox News" or Rupert Murdoch (who has been hounded by leftist radicals since the 1960s).
Explain, I've been away for awhile. Do they syndicate it now? Or is that the solution to their financial woes?
Hmmmm? I wonder if this has anything to do with Air America. They picked it up in several cities. I glanced through the article - but I didn't see anything.
Isn't Clear Channel responsible for those L.A. "Mexico" signs?
I wonder if this has anything to do with the advertisers' boycott of Rush and other conservative hosts. The ads Rush draws in my market (ATL) are mostly public service ones.
The new management said "No God talk" and "no bill numbers, they are boring". So mindless trivia and bitching is okay but nothing concrete and don't make waves.
Current management has already said that a liberal Houston CC talk radio show could go on the air "soon" if a station frees up.
I will boycott XM radio for their ties to CC. Sirius is the way I would go if I went digital. Also I hold a grudge that CC is dropping "white guy" rock stations for spanish language FM broadcast (even in DC); I believe under the theory that "white folk" have more disposable income and will pay $10 to listen to radio. Better to open those broadcast frequencies to new demographics. More insulting was the motto "Latino and PROUD" that they use in advertising (try "Anglo and PROUD" sometime). I even heard an inhouse promotions clip on the streamcast talkradio station where they advertised the revamped 101FM and a hispanic male boasted how "We're the majority now, man!". Good, then give up those set asides and give them to the new minority on the block.
Such racial balkanizing does no one any good. Certainly not as corporate identity.
It is mostly inhouse and PSA in Houston as well. The PSAs are decidedly liberal too (Sierra Club is behind one of them).
Don't know which stations you listen to.
I listen to WGST (640 on your radio dial). All, or nearly all of the ads on Rush Limbaugh are paid.
And as someone said, for every ad spot there are advertisers lined up.
Not really. They own the billboard and sell advertising space to anyone who will pay.
The TV station is owned by a different group.
I guess I judge all Clear Channel by the one in San Diego at KOGO 600 AM. They have nothing but the most conservative people on the air.
Don't know if the station I listen to is CC but until a few years ago I was a diehard AM listener.
Then almost overnight it seemed that the entire morning drive show became one big commercial, interspersed with a minute or two of news here and there. No banter, no nothing. Commercials and traffic, commercials and weather, commercials and news.
Then Boortz, et al, started paring down their programming. I think for each hour there is less than 30mins of actual talk.
Sorry, I just don't listen anymore. Ride my motorcycle, ride my bicycle, I don't give a rat's rearend about radio anymore.
Once again it is proven that liberalism is a bad bet.
Here in COlumbus, they changed 1230 AM from a sports/talk show station that played oldies music on weekends to Err America about a year ago. Also, I have a friend that works for 610 WTVN the biggest AM station in town. They recently moved to a new studio where they now run several stations from Ohio all from once location with canned music/news/weather. I suppose its more efficient but I think the stations loose what small town atmosphere they had. 610 has been contracting the weather forcast from an outfit in Boston for 10+ years. If you don't pay close attention during the banter you think they are in the next room to the host, rather than 500 miles away.
They operate to make a profit. If you live in a liberal enclave, what do you think will be marketed? I live 30 miles north of PGH...It's pretty well conservative, unless you go into the city..but Allegheny is doing it's own good job of starving itself to death by democcratic policy..
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